ACORN, Payola and Color of Law

Here's one example of how state law enforcement officials have leveraged and possibly violated the law to help ACORN in return for ACORN's political help.

In December 2004, Minnesota Attorney General Mike Hatch sued Capital One for failing to state in its advertisements that it could increase interest rates on credit cards. As part of a 2006 settlement, Capital One paid $749,999, of which $249,999 went to ACORN, $250,000 went to the nonprofit Legal Aid, and $250,000 to the State of Minnesota.

ACORN's political action committee had endorsed Mike Hatch for attorney general in 1998 and 2002, and in 2006 for governor.

In 2008, Minnesota's Legislative Auditor, James Nobles, conducted a review of the Capital One settlement and payment to ACORN. By letter, he asked Hatch's successor, current state Attorney General Lori Swanson (who was given a grade of A+ from ACORN in 2008) for information about the settlement. Specifically, Nobles asked:

[Minnesota statute 16A-151] says: ‘A state official may not commence, pursue, or settle litigation, or settle a matter that could have resulted in litigation, in a manner that would result in money being distributed to a person or entity other than the state.' An exception is... if the settlement amount is less than $750,000. It is alleged that the Attorney General's office sought a judgment of $749,999 to avoid the prohibition [on diverting settlement money from the state]. Is that true? If not, please explain why the Attorney General's office sought a $749,999 judgment.

Swanson's response to Nobles in May 2008, rather than conducting any independent inquiry herself, consisted of forwarding a May 2008 letter from Mike Hatch, who denied impropriety. Swanson's response to the investigation of whether Minnesota law was violated, in other words, was that the alleged perpetrator said he's innocent.

Hatch's letter begged more questions than it answered. In response to Nobles' question about why Hatch sought and accepted a $749,999 settlement, exactly one dollar below the statutory threshold requiring all of the settlement money to be paid to the state, Hatch replied, "[t]he answer is because that is what the statute permitted."

That answer, of course, evades Nobles' question. The settlement could have been for any amount or no amount whatsoever, rather than exactly one dollar below the threshold that would have required the settlement proceeds be paid to the state. That exactly one-dollar difference would have barred ACORN from receiving any portion of the settlement proceeds.

Hatch admitted that "[i]t was in the State's interest to settle the litigation," and he explained the retired judge mediator in the case seriously questioned the merits and available remedies for the case. It is conceivable from Hatch's letter that Capital One should have paid no money.

Hatch said Capital One refused to consent to a settlement that could be construed as a civil penalty payment to the state. State civil penalties, however, may be less than $750,000. The $749,999 threshold was irrelevant to Capital One's concern, and irrelevant to why Hatch would accept a settlement paying ACORN $249,999, especially since the settlement included $250,000 to the state.

Hatch's letter gets even more squirrelly. He claimed Capital One agreed that $250,000 would be used to reimburse Minnesota for its investigation costs, and $250,000 would go to Legal Aid at Hatch's suggestion. Hatch, however, claimed it was a Capital One executive who suggested that the remaining $249,999 be paid to ACORN "for purposes of supporting financial advocacy, education and assistance in Minnesota." The question remains, who influenced Capital One to suggest payment to ACORN as part of a settlement?

In explaining why the payment to ACORN should not be construed as quid pro quo for ACORN PAC's several political endorsements of Hatch (who narrowly lost his 2006 gubernatorial bid to Tim Pawlenty), Hatch said the Capital One settlement payment was to ACORN, which is a separate entity from ACORN PAC. He assured Noble that by law the entities could not commingle their activities. He said he was never endorsed by ACORN. His successor Lori Swanson, however, received a grade of A+ from ACORN, not ACORN PAC.

Hatch also said he "had worked with ACORN on several credit-related cases . . . and found [ACORN] very credible." He went on to praise ACORN's financial counseling services as "very credible," and noted "ACORN also provides free tax preparation services for low and moderate income families in partnership with the IRS."

Hannah Giles and James O'Keefe should have gone to St. Paul, I guess.

The Legislative Audit Commission conducted a meeting on June 30, 2008, where Noble presented his findings. MinnPost.com reported that Lori Swanson declined an invitation to appear at the hearing. Hatch didn't show, either, and told the reporter he's "not talking to [the reporter]."

That hearing addressed other issues, such as a Medicare fraud investigation. MinnPost.com reported, "that some attorneys in the Attorney General's Office felt pressured to

Sign and issue a civil investigative demand without sufficient merit;

Insert unsubstantiated information in an affidavit;

Give advice that was not in the best interest of the client;

Find defendants to help the Attorney General's Office bring certain types of lawsuits; and

Post comments favorable to the office and Attorney General Swanson on an internet blog and record the time used for blogging as annual leave even though state time was used."

Such problems, if true, would be serious trouble for a country lawyer, never mind the chief law enforcement official of a state.

What Legislative Auditor Nobles did not address was another part of the statute requiring settlement money to go to the persons injured by the alleged misconduct of the target of the AG's lawsuit, and if such persons can't be located, then to the state. The law is designed to use settlement money to compensate the injured. Mr. Hatch seems to have used it as a political slush fund.

ACORN says it helped Lori Swanson in many ways, including writing legislation with her. She looked the other way when the law may have been violated by her predecessor to help ACORN, which helped Swanson.

Lori Swanson and Mike Hatch need to be questioned in detail and under oath about whether they violated the law and acted to conceal such violations.

Here's one example of how state law enforcement officials have leveraged and possibly violated the law to help ACORN in return for ACORN's political help.

In December 2004, Minnesota Attorney General Mike Hatch sued Capital One for failing to state in its advertisements that it could increase interest rates on credit cards. As part of a 2006 settlement, Capital One paid $749,999, of which $249,999 went to ACORN, $250,000 went to the nonprofit Legal Aid, and $250,000 to the State of Minnesota.

ACORN's political action committee had endorsed Mike Hatch for attorney general in 1998 and 2002, and in 2006 for governor.

In 2008, Minnesota's Legislative Auditor, James Nobles, conducted a review of the Capital One settlement and payment to ACORN. By letter, he asked Hatch's successor, current state Attorney General Lori Swanson (who was given a grade of A+ from ACORN in 2008) for information about the settlement. Specifically, Nobles asked:

[Minnesota statute 16A-151] says: ‘A state official may not commence, pursue, or settle litigation, or settle a matter that could have resulted in litigation, in a manner that would result in money being distributed to a person or entity other than the state.' An exception is... if the settlement amount is less than $750,000. It is alleged that the Attorney General's office sought a judgment of $749,999 to avoid the prohibition [on diverting settlement money from the state]. Is that true? If not, please explain why the Attorney General's office sought a $749,999 judgment.

Swanson's response to Nobles in May 2008, rather than conducting any independent inquiry herself, consisted of forwarding a May 2008 letter from Mike Hatch, who denied impropriety. Swanson's response to the investigation of whether Minnesota law was violated, in other words, was that the alleged perpetrator said he's innocent.

Hatch's letter begged more questions than it answered. In response to Nobles' question about why Hatch sought and accepted a $749,999 settlement, exactly one dollar below the statutory threshold requiring all of the settlement money to be paid to the state, Hatch replied, "[t]he answer is because that is what the statute permitted."

That answer, of course, evades Nobles' question. The settlement could have been for any amount or no amount whatsoever, rather than exactly one dollar below the threshold that would have required the settlement proceeds be paid to the state. That exactly one-dollar difference would have barred ACORN from receiving any portion of the settlement proceeds.

Hatch admitted that "[i]t was in the State's interest to settle the litigation," and he explained the retired judge mediator in the case seriously questioned the merits and available remedies for the case. It is conceivable from Hatch's letter that Capital One should have paid no money.

Hatch said Capital One refused to consent to a settlement that could be construed as a civil penalty payment to the state. State civil penalties, however, may be less than $750,000. The $749,999 threshold was irrelevant to Capital One's concern, and irrelevant to why Hatch would accept a settlement paying ACORN $249,999, especially since the settlement included $250,000 to the state.

Hatch's letter gets even more squirrelly. He claimed Capital One agreed that $250,000 would be used to reimburse Minnesota for its investigation costs, and $250,000 would go to Legal Aid at Hatch's suggestion. Hatch, however, claimed it was a Capital One executive who suggested that the remaining $249,999 be paid to ACORN "for purposes of supporting financial advocacy, education and assistance in Minnesota." The question remains, who influenced Capital One to suggest payment to ACORN as part of a settlement?

In explaining why the payment to ACORN should not be construed as quid pro quo for ACORN PAC's several political endorsements of Hatch (who narrowly lost his 2006 gubernatorial bid to Tim Pawlenty), Hatch said the Capital One settlement payment was to ACORN, which is a separate entity from ACORN PAC. He assured Noble that by law the entities could not commingle their activities. He said he was never endorsed by ACORN. His successor Lori Swanson, however, received a grade of A+ from ACORN, not ACORN PAC.

Hatch also said he "had worked with ACORN on several credit-related cases . . . and found [ACORN] very credible." He went on to praise ACORN's financial counseling services as "very credible," and noted "ACORN also provides free tax preparation services for low and moderate income families in partnership with the IRS."

Hannah Giles and James O'Keefe should have gone to St. Paul, I guess.

The Legislative Audit Commission conducted a meeting on June 30, 2008, where Noble presented his findings. MinnPost.com reported that Lori Swanson declined an invitation to appear at the hearing. Hatch didn't show, either, and told the reporter he's "not talking to [the reporter]."

That hearing addressed other issues, such as a Medicare fraud investigation. MinnPost.com reported, "that some attorneys in the Attorney General's Office felt pressured to

Sign and issue a civil investigative demand without sufficient merit;

Insert unsubstantiated information in an affidavit;

Give advice that was not in the best interest of the client;

Find defendants to help the Attorney General's Office bring certain types of lawsuits; and

Post comments favorable to the office and Attorney General Swanson on an internet blog and record the time used for blogging as annual leave even though state time was used."

Such problems, if true, would be serious trouble for a country lawyer, never mind the chief law enforcement official of a state.

What Legislative Auditor Nobles did not address was another part of the statute requiring settlement money to go to the persons injured by the alleged misconduct of the target of the AG's lawsuit, and if such persons can't be located, then to the state. The law is designed to use settlement money to compensate the injured. Mr. Hatch seems to have used it as a political slush fund.

ACORN says it helped Lori Swanson in many ways, including writing legislation with her. She looked the other way when the law may have been violated by her predecessor to help ACORN, which helped Swanson.

Lori Swanson and Mike Hatch need to be questioned in detail and under oath about whether they violated the law and acted to conceal such violations.